Time interval concept financial statements both

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Time interval concept - Financial statements (both income statement and statement of financial position) are prepared at regular interval of 1 year. - This is made for convenience of comparison by the users. Going concern concept - We assume that business will continue to operate for foreseeable future, e.g.1 year. - It is not practical to keep all assets updated at the market values, not relevant as long as we do not plan to sell those assets. - Therefore, we will continue to use the historical cost concept for assets valuation. Prudence concept - Accountants will not record revenues as long as it is not ascertained. - Accountants will account expenses even though they are not ascertained. - E.g. revenue – we record in account only when we get confirmation from customers order - If we suspect a debtor become uncollectible, we will account it as expense. Accruals (matching) concept
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- Revenues and expenses are accounted when they are incurred/earned, irrespective of the date of paid/received. - Eg) rent paid = RM11,000, rent due in December = RM1,000, total rent expense = RM12,000 Materiality concept - Level of importance of accounting information. - This depends on the size of the amount. - Material items – record under a separate ledger, eg bought a van RM100,000 - Immaterial items – papers, staples, pens – stationery account.
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